We’ve written a series of blog posts answering questions regarding Chapter 7 bankruptcy in Wisconsin and its financial impact. Call (262) 827-0375

Overwhelmed with Debt?

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The COVID-19 pandemic has had dire economic consequences for many people, and there have been protections put in place to help people survive this difficult time. Those aren’t going to last forever, though, and you may be looking at your financial situation and wondering just how you’re going to manage. If you feel overwhelmed with debt, it’s important to think things through now and have a plan in place while you still have a number of options. There are basically three different approaches you can take: debt consolidation, debt management, and bankruptcy. This post explores each of them.

Debt Consolidation

Debt consolidation is just what it sounds like: you gather all your debts into one place so that you’re making one payment a month. There are several ways to consolidate your debt. If most of your debt is unsecured credit card debt, you can take out another credit card that offers 0% interest for a period of time (often 12 to 18 months) and then transfer your other credit card debt onto that new card. You then have that given time to pay down the principal. This method only works if all or most of your debt is credit card debt. If you have other sources of debt, you may need to take out a consolidation loan. These loans are financed by banks, and the main concern here is that you trade your unsecured debt for secured debt, as most will require collateral. Even if your consolidation loan doesn’t require specific collateral, it may well have a cross-collateralization clause. That means that if you get a consolidation loan from the same bank that financed your auto loan, and you fall behind on your consolidation loan payments, the bank can repossess your car. So debt consolidation can certainly work, though it has some important limitations, and poses some significant risks.

Debt Management

There are a number of debt management companies that will act on your behalf to manage your financial situation. The debt management company negotiates with the credit card companies on your behalf, and establishes a repayment plan for you. It’s important for you to know that agreeing to a debt management plan comes with a number of hidden costs – monetary and otherwise. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also, most credit card companies will require that an account entering into a debt management plan be closed, so you lose your access to credit. And the fact that you’re engaged in a debt management plan will be noted on your credit report. Most debt management plans run for three to five years, and at least half of clients do not successfully complete the plan.

Bankruptcy

Individuals usually file either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is known as “liquidation” bankruptcy, and in order to qualify for it, you must not make more than your state’s median household income. In Wisconsin, that amount is $67,355 (as of 2019, the latest available figures). Although the word liquidation sounds threatening, the truth is that there are exemptions and you will almost certainly keep your home (if you have a mortgage) and your car. If you have a second home or other luxury item, those may be sold to pay your debt. Chapter 7 bankruptcy is quick, usually taking three to four months, and it eliminates all your unsecured debt. Chapter 13 bankruptcy is also known as “wage-earner’s” bankruptcy. It functions a lot like the debt management plan; a trustee appointed by the court drafts a plan, you and your creditors agree to it, and then the trustee administers the plan. It lasts between 3 and 5 years. There is no means test like Chapter 7 bankruptcy, but there is a cap on how much you owe. To be eligible to file for Chapter 13 bankruptcy, you must have less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

If you’re overwhelmed by debt and considering your financial future, you have options. Contact the experts at Burr Law to talk through your specific situation, and have them help you chart the best course forward.

Most Common Types of Bankruptcy

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This past year’s double catastrophe (the pandemic and its subsequent economic impacts) have brought many people to the brink of financial disaster. Whether it is unanticipated medical expenses, loss of income, or a combination of other factors, you may be emerging from the COVID-19 disaster to discover just how dire your money situation is. If that’s the case and you are considering bankruptcy as an option, it’s important that you know what kinds of bankruptcy are open to you. This post will explore three of the most common types of bankruptcy open to individuals: Chapter 7, Chapter 13, and Chapter 12.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can derive the benefit of totally eliminating unsecured debt while retaining your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, $67,355 as of 2019 (the latest figures available).

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. With this type of bankruptcy, you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

Chapter 12

Chapter 12 bankruptcy is specifically designed for family farmers and family fishermen. It recognizes the greater debt burden that family farmers and fishermen carry but treats them more like individuals than business bankruptcies. The process is more streamlined and less expensive than Chapter 11, for instance. If you’re a farmer, in order to qualify for Chapter 12, your total debts must not exceed $4,153,150, and 50% of them must come from the farming operation. If you’re a fisherman, your total debts must not exceed $1,924,550, and 80% of them must be associated with your fishing enterprise. In both cases, more than 50% of your gross income should come from your farming or fishing. This bankruptcy pays off all or a portion of your debts over 3 years, though that can be extended to 5 years if necessary. You continue operating your farm or fishing business during the bankruptcy process.

These are the most common kinds of bankruptcy for individuals in Wisconsin. For businesses, other bankruptcy options apply. If you’re wondering how you’re going to resume your life after the pandemic, bankruptcy may give you a positive way forward. Consult the experts at Burr Law today to find out more.

What Happens If You Become Bankrupt?

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“Bankrupt” can have lots of scary connotations. You might imagine that you will be forced out of your home, have your car repossessed, and lose all your valuables. You might believe that you will never again be able to acquire a credit card or any type of loan after bankruptcy. Those fears arise from a lack of information. In this post, we will look at what bankruptcy is and its effects.

Two Types of Bankruptcy

The two primary forms of bankruptcy that individuals (and couples) file are Chapter 7 and Chapter 13. They each have advantages and disadvantages, and it’s important to consult with an expert to determine which one is the best for you. Chapter 7 bankruptcy takes about 3 to 6 months from time of filing; Chapter 13 has a plan that lasts between 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can derive the benefit of eliminating consumer credit debt while retaining your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2019 (the last official figure) was $67,355.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. With this type of bankruptcy you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Bankruptcy And Your Credit Report

Generally speaking, bankruptcy stays on your credit report in Wisconsin for about 10 years. Remember, though, that even if you don’t file bankruptcy, your creditors can obtain a judgment against you for your debt, and that judgment would appear on your credit report. A judgment can remain on your credit report for seven years or until the statute of limitations expires, whichever is longer. In Wisconsin, the statute of limitations on a judgment can be up to 20 years! So a bankruptcy may well fall off of your credit report before a particular judgment.

Bankruptcy And Your Credit Score

Bankruptcy will mean a drop in your credit score immediately after filing. However, you may already have a poor credit score due to your debt-to-asset ratio (your debt is high compared to your available credit) and delinquent accounts; in that case, the decrease in your credit score may be less than you suppose. If your credit score was good before filing bankruptcy, the drop may be more pronounced.

Bankruptcy And Obtaining Credit Cards

When you file for bankruptcy, whether it is Chapter 7 or Chapter 13, you usually lose access to your credit cards. That doesn’t mean that you will never again have a credit card. There are credit cards specifically designed for those with poor credit and the experts at Burr Law can advise you on how best to reclaim your creditworthiness through measured use of particular credit cards.

The professionals at Burr Law can answer all of your bankruptcy questions. With all of the information, you can make an informed decision about bankruptcy.

Debt Consolidation vs Debt Settlement

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When you’re in debt, it can seem like there’s no way out. Credit card payments, rent or mortgage payments, car payments, student loan payments . . . you may feel like you’re being bled dry. If it’s just impossible to keep juggling all your financial obligations, it’s time to think seriously about your debt management problems. In this blogpost, we will explore the options of debt consolidation, debt settlement, and bankruptcy.

Debt Consolidation: What Is It?

In its most basic form, debt consolidation works by combining multiple debt payments into one monthly payment through obtaining either a secured or unsecured loan. That monthly payment is sometimes lower than the individual payments combined, and the interest you pay is sometimes lower as well. You will maintain your access to credit, though incurring more debt increases the likelihood of the debt consolidation failing. One of the easiest ways to consolidate your debt is to obtain a new credit card that offers 0% interest for a period of time (usually 6 to 12 months). Once you get the card, you can transfer the balance from other credit cards where you are paying high interest to the new card and use the 6 to 12 months to pay down the principal. Of course, that only consolidates your credit card debt. Alternatively, you can take out a debt consolidation loan; most are secured loans though, and you risk losing your collateral, usually your car or other significant tangible property.

Cross-Collateralization

Sometimes you may risk losing collateral that you aren’t aware you have placed in jeopardy. That can happen when your debt consolidation loan has a cross-collateralization clause that lets the lender take other property it has financed if you default on the debt consolidation loan. For example, if you get your debt consolidation loan through the same bank that financed your car, under the cross-collateralization clause, if you default on the debt consolidation loan, the bank could repossess your car—even if the car payments are current.

Debt Management Plans

Some people go to an agency that creates a debt management plan for them and negotiates with the credit card companies on your behalf. It’s important for you to know that agreeing to a debt management plan comes with a number of hidden costs – monetary and otherwise. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also, most credit card companies will require that an account entering into a debt management plan be closed, so you lose your access to credit. And the fact that you’re engaged in a debt management plan will be noted on your credit report. Most debt management plans run for three to five years, and at least half of clients do not successfully complete the plan.

Negative Tax Consequences

Depending on your financial condition, any money you save from debt relief services such as debt consolidation may be considered income by the IRS, which means you pay taxes on it. Credit card companies and other creditors may report settled debt to the IRS, which the IRS considers income.

Bankruptcy

There are two types of bankruptcy you can pursue: Chapter 13 and Chapter 7. Chapter 7 is means tested, so you need to make no more than your state’s median household income ($67,355 for Wisconsin in 2019). If you qualify for Chapter 7 bankruptcy, your unsecured debt can be completely eliminated. The whole process takes about four months, and then you can start over with a clean slate. Chapter 13 bankruptcy lasts between three to five years, similar to debt consolidation. With Chapter 13 bankruptcy, the moment you file, there is an automatic stay on all collection actions, and you will almost certainly retain possession of your home and vehicle.

If you’re experiencing significant debt management problems, it would be a good idea to talk to one of the experts at Burr Law.

Tax Debt – Filing for Bankruptcy in 2021

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With more and more people free-lancing and the gig economy in full swing, it’s becoming more common for people to owe the IRS for back taxes. And unpaid taxes can add up to a huge financial burden, especially on top of all your other expenses. If you’re feeling overwhelmed by your financial situation, you may be considering bankruptcy. Bankruptcy is a good way to clear unsecured debt, but what about tax debt? This post explores the question of what happens with tax debt when you file for bankruptcy.

Automatic Stay

The moment that you file for bankruptcy, whether it is Chapter 7 (most commonly) or Chapter 13, all your creditors must stop harassing you for payment. That includes the IRS. So no more threatening letters, phone calls, etc. The automatic stay also applies to property. The IRS can’t touch your more valuable assets. So no matter what stage the IRS collection effort is in, the automatic stay stops it completely. But remember, this is just a pause. And as you’ll see, knowing when to file for bankruptcy is especially important if you’re trying to eliminate unpaid taxes as well as other debts.

Conditions for Tax Debt to be Discharged

As you probably already know, IRS rules and regulations can be like an impenetrable maze. There is a regulation for pretty much everything. So, it should be no surprise that there are specific rules for bankruptcy discharge. And you should expect that the IRS will object to eliminating your tax debt if it can find any reason to do so. The main bankruptcy discharge rules have to do with time.

Income Taxes

Chapter 7 bankruptcy only discharges income tax debt. Your 1040 taxes are definitely income taxes, but other taxes aren’t. For instance, property taxes and trust fund taxes are definitely not income taxes. So the kind of taxes you owe the IRS makes all the difference. If you do owe unpaid income taxes, then you’ve cleared the first hurdle.

Taxes Filed for Last 2 Years

You have to have filed your taxes for at least the last 2 years (if you were required to file). At the time you file for bankruptcy, the IRS needs to have your tax filings for the previous 2 tax years, and that applies even if you filed those taxes on time. If you didn’t file and the IRS prepared substitute returns to determine what you owed, those do not count as taxpayer-filed returns.

Tax Debt Must Be at Least 3 Years Old

Your income tax debt must be at least three years old. And it’s crucial to remember that Tax Day is not always April 15. Some years, it could be the 16th, 17th, or even 18th. Last year (2020) it was July 15 because of the pandemic. IRS lawyers have been known to object to discharge over one or two days. So, make sure you file the petition on the correct day, or else you will have to start over.

240 Day Rule

Your tax assessment can’t be more than 8 months old, or must not have been assessed yet. If the IRS has not assessed the debt within the last 240 days, the income tax debt is not dischargeable. It’s almost impossible to tell if the IRS has assessed the debt or not, because this process is an internal accounting tool. But generally, if you’ve not received a bill which breaks down the amount due by tax years, it’s probably not assessed the debt yet.

Burr Law Helps with Complexities

At Burr Law, our professionals have years of experience dealing with bankruptcy law. We understand the complicated IRS rules around bankruptcy, and will work with them to make sure your tax debt is included in your bankruptcy. Don’t leave something this important to chance.

Does Bankruptcy Clear All Debt?

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The reason you choose to file bankruptcy is to get rid of your debt, so it’s important to know whether or not it actually does. Does bankruptcy clear all debt? The short answer is probably not. That “probably” is there because it does eliminate a lot of debt, and it’s possible that it will take care of all your debt, though that’s unlikely. Let’s take a closer look.

Different Bankruptcy Options

The two most common forms of bankruptcy are Chapter 7 and Chapter 13. You can file Chapter 7 if your median household income is equal to or below a certain level. For the state of Wisconsin, that amount is $67,355 (as of 2019). This type of bankruptcy takes between 3 to 6 months. Or you can file Chapter 13 bankruptcy, which has no income status requirement, but does have a cap on the amount of debt. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Unsecured Debt

Whatever method of bankruptcy you choose to use, your unsecured debt will almost certainly be eliminated. Unsecured debt is debt you have incurred without having to put up collateral. So, for instance, all credit card debt is unsecured debt. So is medical debt. And any other obligation you have that you got simply through agreeing to pay it back. That gym membership that you can no longer afford, but that’s due to run another 2 years? That’s unsecured debt.

Secured Debt

Your mortgage, your car payment, your home equity loan, these are all examples of secured debt. That doesn’t mean that you will lose your home and your car, however. Each type of bankruptcy has provisions to protect your most important assets. The professionals at Burr Law will be able to help you retain these kinds of essential items.

Money Owed to the Government

It’s extremely difficult to eliminate tax debt. There are a number of conditions that must be met in order for some tax debt to be included in those cleared through the bankruptcy process. The experts at Burr Law can work with your specific situation to see if it is possible to clear some of your tax debt. Any debt relating to tax fraud would not be exempt. It is virtually impossible to eliminate student loan debt. If your student loans are from the federal government or guaranteed by the federal government, you should be prepared for the likelihood that they will still be there once your bankruptcy is complete. Even money owed to local governments are difficult to clear through bankruptcy. If you’ve accumulated a hefty amount in traffic tickets, you’ll still need to pay that back.

Specific Personal Obligations

There are some particular personal obligations that bankruptcy will not eliminate. For instance, bankruptcy will not clear your child support payments or your alimony obligations. Similarly, if you have been involved in a personal injury or death as a result of DUI case as the defendant and are obligated to pay a settlement, that will still remain.

Bankruptcy is a great way to deal with most of your debt. However, it is unlikely to eliminate all of it. It’s crucial to work with experienced professionals in the field, like those at Burr Law, so that you can clear as much of your debt as possible.

Credit Card Debt: Can Credit Card Companies Repossess My Items If I Don’t Pay?

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Credit Card Debt is Unsecured Debt

Unsecured debt refers to any kind of debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–all are examples of revolving credit. Credit card debt is unsecured because you haven’t had to offer any kind of collateral in order to get it. Unlike your auto loan, where the vehicle itself functions as the collateral, credit card companies offer you short-term loans that you agree to repay with the stated interest. You can pay for your groceries with your credit card just like you can buy a computer with your credit card. In either case, the credit card company cannot come and take the food out of your refrigerator, or the computer off your desk. Since there is no collateral with credit cards, there can be no repossession.

Credit Card Debt Can Spiral

It’s easy to purchase things with credit cards, and almost without you noticing, you find your credit cards maxed. With all of the economic disruptions caused by the pandemic, you may have had to rely more heavily on credit cards, as well. The minimum payment due only pays the interest, and when even that becomes difficult, you need to consider your options. This situation is not unusual. The average American had a credit card balance of $6,200 in 2019, according to Experian. And revolving credit with its high interest means disaster for those who can’t pay the balance in full every month. That means you continue to accrue additional interest charges from month to month. The average annual percentage rate on all credit cards was 20.21% as of August 2020. Department store credit cards averaged 24.22%. A single late payment can boost your interest rate even higher.

Bankruptcy Deals With Credit Card Debt

If your credit card obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, credit card debt can be entirely eliminated. You also have the option of filing for Chapter 13 bankruptcy where you enter into an agreement with your creditors to repay a portion of your debt over 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can completely eliminate your credit card debt while keeping your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. Credit card debt is often, but not always, eliminated. Even when it is not entirely written off, you will end up having to repay only a small portion of your credit card debt. With this type of bankruptcy, you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Credit card debt can be overwhelming, but you don’t have to worry about your personal possessions being repossessed. If you’re interested in getting out from underneath crushing credit card debt, you might be wise to consider bankruptcy. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your credit card debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

With COVID-19 Raging, How to Manage Medical Debt

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The COVID-19 pandemic has hit the whole world hard. For those who have contracted the disease, the primary concern is treatment and recovery. Once you have surmounted that challenge, another awaits: medical debt. In Wisconsin, almost 20,000 people have been hospitalized with COVID-19 (19,785 as of December 17, 2020 according to the Wisconsin Department of Health Services) and over 4000 have died. That means that more Wisconsinites are facing massive medical debt than ever before. What can you do when you find yourself in a financial crisis because of your medical crisis? In this post, we look at some of your options.

What Not To Do

Before examining what you should do, here’s something you should NOT do: transfer your medical debt to credit card debt. When you pay your medical bills with your credit cards, you are shifting your debt obligations from an interest-free creditor to a high-interest creditor. Most consumer credit cards charge 18 – 24% interest while medical debt is almost always interest-free. So resist the urge to pay your medical bills with your credit cards unless you are absolutely certain that you are able to pay off the credit card before accruing the interest payments.

Medical Bill Itself

Many people never really look at the itemized medical bill that they receive. That’s understandable. It’s often long, complicated, and uses technical vocabulary, both medical terms and insurance jargon. However, carefully examining the medical bill is absolutely essential. Here is information from the American Academy of Family Physicians that can help with that https://familydoctor.org/understanding-your-medical-bills/. If you have questions or concerns about particular items, use the established process to dispute the charge. If you cannot resolve a disputed charge, you can turn to the Wisconsin Department of Agriculture, Trade and consumer Protection for assistance.

Payment Plan

When are you certain the bill is correct, you can set up a payment plan with the hospital or medical provider. As long as the payment is reasonable, medical providers are usually happy to accommodate you. And you won’t be accumulating interest while you pay off your medical debt. The important thing here is to contact the medical provider right away and negotiate an agreement that you can actually maintain.

Medicaid and/or BadgerCare Plus

If you were uninsured when you went into the hospital, you can still manage to get Wisconsin Medicaid or BadgerCare Plus to cover your hospitalization costs. These programs are retroactive up to three months. That means that if you were eligible for Wisconsin Medicaid or BadgerCare Plus when you went into the hospital, you can apply for and receive that insurance and it will cover the time that you were there. However, if you became eligible for these programs subsequent to your hospitalization, your Medicaid or BadgerCare Plus coverage will not be retroactive.

Bankruptcy

Bankruptcy is a viable option when you are facing thousands of dollars of medical debt. The average cost for a Wisconsinite hospitalized with COVID is $14,573, and sustaining that level of debt, along with your usual obligations may not be feasible. Bankruptcy can completely clear medical debt. There are different options in bankruptcy, and if you are thinking about it at all, you should contact the experts at Burr Law. Chapter 7 bankruptcy completely eliminates unsecured debt; that includes medical debt and credit card debt. A professional bankruptcy attorney can make sure that you get the exemptions you’re allowed, so you keep your house and car. The whole thing takes between 3 and 6 months. Chapter 13 bankruptcy can also eliminate medical debt, though it’s a different process that lasts from 3 to 5 years.

Medical Debt Shouldn’t Be Another Crisis

When you’ve survived a medical emergency like COVID, you shouldn’t need to succumb to a financial emergency. Working with the experts at Burr Law can give you the information and options you need to make sure that you are making the right choices. When it comes to dealing with medical debt, contact Burr Law.

As Pandemic Programs Begin to Expire, Personal Bankruptcies Are Expected to Rise

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A Debt Tsunami Is Coming

As legislation designed to cushion the effects of the COVID pandemic expires after Christmas, filings for personal bankruptcy will undoubtedly soar. Congress was unable to agree on extending stimulus payments, and nobody has received that money in several months. Main Street has been harder hit than Wall Street so far, and deferments on payments for borrowed money–mortgages, student loans, automobile loans and credit card debt–are all due to expire just after Christmas. Bah! Humbug!

So far, many lenders have been flexible about calling in their debts, but they won’t stay that way for long, and when these debt deferment grace periods end, a lot of them will be competing for a lot less money than the total accumulated debt. It’s only at this point that most of us will get an idea of just how costly the COVID pandemic and our responses to it have been. And at this point, too, the competition among debtors to recover as much of what they are owed as they can will have begun.

What Does This Mean for You?

It means that it pays to be realistic and proactive about your prospects for paying back your debt. One portion of our economy that will certainly not lack for business will be the courts and law firms. In many cases, dockets have become backlogged, because COVID has kept lawyers, court employees, and juries at home out of caution. But although financial proceedings don’t typically require juries, the courts that deal with litigating debt settlements will be absolutely swamped.

If you have debt obligations that you feel have gotten beyond your control, you are not alone. In fact, you are one of a great many who have been swept up in circumstances beyond their control. A lot of people ended up ringing up credit card debt at high rates of interest, just to get by. As lenders crack down, people who’ve put off filing for bankruptcy will also begin filing in large numbers. It’s best to get out in front of events if you can. The folks at Burr Law can help you decide whether to file, and taking into consideration your circumstances and the laws of your state, under what chapter to file.

Chapter 7

Most bankruptcies are filed under Chapter 7. Chapter 7 bankruptcy eliminates all unsecured personal debt, such as credit card debt, personal loans, and medical bills. Auto loan debts, mortgage debts, and tax debts still remain. Personal property may be sold to satisfy obligations, though what gets liquidated depends on the state. On the other hand, many people are surprised at what they may be allowed to keep, and sometimes funds are available to help meet the costs of filing. A Chapter 7 filing will remain on your credit report for 10 years, but programs exist to minimize the effects, and it is possible to rehabilitate credit more rapidly if you are strategic and disciplined about it.

Chapter 13

Under Chapter 13, you reorganize and consolidate your debt payments. In this case, your personal property may be protected so long as you meet your newly renegotiated debt obligations. it is typically significantly more expensive to file for Chapter 13 protection, but depending on your situation, it may be the best approach. Chapter 13 filings will remain part of your credit history for 7 years.

Get Professional Advice

Let the folks at Burr Law help you. They’ve seen everything there is to see in bankruptcy, and they’ve helped thousands of clients move on as painlessly as possible. The one thing they haven’t seen before, though, is the sheer magnitude of cases that are likely soon to hit the courts. They are here to help. Make up your mind to call them now, so that you’re not stuck waiting for an enormous number of cases to make their way through the courts prior to yours.

What Are Your Debt Relief Options?

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No matter what, your bills arrive every month, and whether you’ve lost income because of COVID-19, or had a recent health crisis and incurred more debt, your financial obligations remain. If you are beginning to feel crushed by them, it’s time to explore debt relief possibilities. What are your debt relief options? In this post, we’ll explore a number of them.

COVID-Caused Hardship Relief

Although Congress has not passed another stimulus bill yet, the suspension of payments for student loans has been extended until 2021. You don’t need to do anything; direct withdrawals from your account will not occur and you will not accrue interest during this time. Many credit card companies and other lenders have also independently adopted programs to help those struggling due to the pandemic. These include loan extensions, reduced interest rates, and deferred repayments. In order to receive this kind of hardship relief, you may need to prove your hardship with documentation, and there may be other consequences including having your credit card frozen or your account closed. If your difficulties are directly due to COVID-19 and you can see that your situation will improve when the pandemic abates, these may be good options for you to pursue.

Consolidation Loan

A debt consolidation loan combines multiple debt payments into one monthly payment. That monthly payment is often lower than the individual payments combined, and the interest you pay is often lower as well. You will maintain your access to credit, though incurring more debt increases the likelihood of the debt consolidation failing. If the debt consolidation loan is secured, then you risk losing your collateral, usually your car or other significant tangible property. One thing, in particular, to beware of is cross-collateralization. If your loan contains a cross-collateralization clause, you may find yourself losing something you didn’t know you were risking. A cross-collateralization clause lets the lender take other property it has financed if you default on the debt consolidation loan. For example, if you get your debt consolidation loan through the same bank that financed your car, under the cross-collateralization clause, if you default on the debt consolidation loan, the bank could repossess your car—even if the car payments are current.

Debt Management Plans

Some people go to an agency that creates a debt management plan for them and negotiates with the credit card companies on your behalf. It’s important for you to know that agreeing to a debt management plan comes with a number of hidden costs – monetary and otherwise. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also, most credit card companies will require that an account entering into a debt management plan be closed, so you lose your access to credit. And the fact that you’re engaged in a debt management plan will be noted on your credit report. Most debt management plans run for three to five years (the same time frame as Chapter 13 Bankruptcy), and at least half of clients do not successfully complete the plan.

Negative Tax Consequences

Depending on your financial condition, any money you save from debt relief services such as debt consolidation may be considered income by the IRS, which means you pay taxes on it. Credit card companies and other creditors may report settled debt to the IRS, which the IRS considers income.

Bankruptcy

There are two types of bankruptcy you can pursue: Chapter 13 and Chapter 7. Chapter 7 is means tested, so you need to make no more than your state’s median household income ($67,355 for Wisconsin – 2019). If you qualify for Chapter 7 bankruptcy, your unsecured debt can be completely eliminated. The whole process takes about four months, and then you can start over with a clean slate. While it is known as “Liquidation” Bankruptcy, there are exemptions, and most people keep their car and house. Chapter 13 bankruptcy works by having a court approved agreement negotiated between creditors and debtors. There are no income ceilings to qualify for Chapter 13, and the moment you file, there is an automatic stay on all collection action. Chapter 13 bankruptcy agreements generally last from three to five years.

If you need debt relief, contact the experts at Burr Law. We will talk you through all of your options and help you decide what is best for your specific situation.